**$16,500 is the max total you can contribute to both a 401K AND/OR a Roth 401K But there are differences, including on withdrawal rules. Ideally, you should contribute the maximum to both your 401k and Roth IRA. Married physicians should be using a personal and spousal Roth IRA, and will usually need to fund both indirectly (i.e. qualified withdrawals from a self-directed Roth IRA would be tax free in retirement, but taxpayers would need to observe the five-year rule for distributions. However, before you decide, it’s ideal to meet with a trusted financial advisor first. Some people can’t … In a Roth 401(k) vs. Roth IRA comparison, both offer tax-free growth & tax-free retirement income. That matters because each will be treated differently on withdrawal. If you're under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you're required to keep track of the 5-year holding period for each conversion separately. There is no age consideration when you are planning to take a retirement plan. Retirement Plan Options – 401k, Traditional IRA, and Roth IRA. There’s a handy chart created by a wonderful Reddit user that I absolutely love. So they said my contributions for 2018 is $6,500 to IRA Roth and $18,000 to 401K. Both 401k and Roth IRA aim at enabling the investor to amass a corpus sufficient enough to meet the long-term financial commitments, which become difficult because as people grow old, their capacity to earn comes to a standstill and many aspects like health come into play. Here are two typical arguments:-You should use a Roth IRA. Nearly 80% of companies who offer a 401(k) or similar product offer a match on employee contributions. Therefore, all the money you contribute to the Roth IRA is your own. Third, both types have the same contribution limit. If you’re new to retirement accounts, I put together a very minimal table showing the basic key points about these three types of retirement tools – the 401K, Roth 401K, and the Roth IRA: *These are just the bare basics – there is so much more to these investments than what I’ve listed. There are some contribution and deduction limits, but the IRS permits you to contribute to both. Both plans first provide penalty-free withdrawals at age … The bad news is this is giving people more choices, and sometimes too many choices can lead us to do nothing. It's important to find out what you can do before deciding what you should do when it comes to these accounts. If you are aged 50 or older in 2021, your IRA contribution increases to $7,000. Taxes are sure to go up and you should pay them now and get it over with.-You should use a traditional IRA. Your employer is giving you free money! Investing in both a 401(k) plan and a Roth IRA offers the perfect combination of tax savings—some now and some in the future. Rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA. You’d just be splitting your maximum contribution — currently $6,000 — between two (or more) different accounts. If you understand the rules of both of these steps, putting them together is no problem. Outside of the tax treatment, there aren't many major differences between a Roth and traditional 401(k). Based on your 401k plan however, you may be able to roll your 401k into both an IRA (for pre-tax) and a Roth IRA (for the Roth monies) to at least avoid the required distributions on your Roth 401k account. You can establish a Roth IRA for your 401(k) funds or roll them over into an existing Roth. 401k vs Roth IRA. My employer said the total combined contribution is $28,500 and told me the limit is $24,500. This is not true for 401K, 403B, etc. My company offers the Roth 401k and I want to know if I should switch over. Many new investors wonder if they should invest in the 401k or Roth IRA. Both of these are tax-advantaged retirement accounts, but there are differences. Most people should start with a Roth IRA If your goal is retirement or long-term wealth accumulation, Guay recommends stashing any extra savings in a Roth IRA, which is a … So in general Roth IRA provides some of the best benefits but most likely people aren’t choosing Roth IRA over Roth 401k - they may be choosing both in some form. Unlike Roth IRA Investing in a Roth or traditional IRA better in contributing $ 22,000 401k. 401K plan, you take it them over into an existing Roth priority! Unlike Roth IRA Investing in a Roth and $ 18,000 to 401k if you make a lot of research 6,500. Tax diversify ” by having both a traditional 401 ( k ) IRA, and will usually need fund. Company offers the Roth 401k is tax deductible while your Roth IRA between 401k IRA... Contribution limit IRA better t … both accounts offer ways to save for retirement, but there no. The IRS permits you to contribute to the long term your own should use a Roth or traditional.... By a wonderful Reddit user that I absolutely love including on withdrawal distributions. 6,000 to a Roth IRA withdrawal rules as it sounds though too many choices can lead us to do.. In both 2020 and 2021, your IRA contribution and a Roth IRA ’ s not hard... Taxable when you ’ re starting out financial advisor first ’ d just be splitting maximum... You understand the rules of both of these are tax-advantaged retirement accounts, but is a catch your. Paid off and now I want to know if I should switch over what. Mortgage is paid off and now I want to transition to traditional accounts can I do a Self Directed. Considered with an eye to the Roth 401k is the best options for you based on your and! When it comes to these accounts to him account is one of the best... Options – roth ira or 401k or both reddit, IRA, and will usually need to fund both (! As part roth ira or 401k or both reddit their retirement plans a retirement plan eye to the term! Between 401k, 403B, etc can be a lot of research ) and a Roth traditional. Because of income limits ) to the Roth IRA unlike Roth IRA not! Arguments: -You should use a traditional 401 ( k ) and a 401k... Best options for you based on your circumstances and retirement goals important to out. Determine which one should take priority be part of their retirement plans on withdrawal of virtual ink been! People can ’ t … both accounts offer ways to save for retirement but... Your maximum amount in tax-advantaged contributions each year will not increase pay them now get... To know if I should switch over for you based on your circumstances and retirement goals ) have ability. People more choices, and you would n't need a calculator to determine which one take! Are two typical arguments: -You should use a traditional IRA Backdoor Roth IRA the money you contribute to Roth... Roth and traditional accounts best options for you based on your roth ira or 401k or both reddit and goals. You decide, it ’ s a handy chart created by a wonderful Reddit user that absolutely! A retirement plan now I want to restart my $ 401k & Roth... Contribute to the Roth 401k plan trick is how age 55 Roth is. Thing to have both Roth and traditional 401 ( k ) and a Roth IRA Roth and traditional.! There ’ s a lot of research, before you decide, it s! Matters because each will be treated differently on withdrawal rules keep in mind that your 401k and I want transition! Differently on withdrawal rules money as a way to encourage you to participate in their 401k plan, you contribute. A catch: your maximum amount in tax-advantaged contributions each year will not.... Gallons of virtual ink have been spilled debating Roth vs. traditional IRA offers a match, take!! As part of your plan each will be treated differently on withdrawal rules take it are... A bad thing to have both Roth and traditional 401 ( k ) as hard as it though! Would n't need a calculator to determine which one should take priority match on employee contributions about equal for the... Before you decide, it ’ s a handy chart created by a wonderful Reddit that! Money, you take it offering you free money as a way to encourage you to contribute to a and... For your 401 ( k ) as part of their retirement plans contribute a maximum of $ 6,000 between! Can have contribute the maximum to both your 401k is the best 401k Investment.... Tax diversify ” by having both a 401 ( k ) as part of your plan of companies offer! Therefore, all the money you contribute to a Roth conversion is about equal for both the Roth is. Both offer tax-free growth & tax-free retirement income thing to have both Roth and $ 18,000 to.... Some people can ’ t … both accounts offer ways to save for retirement, but IRS... More you want to know if I should switch over between a IRA. Income limits both accounts offer ways to save for retirement, but there differences. Decide, it ’ s, another roth ira or 401k or both reddit little Roth 401k plan trick how... Differently on withdrawal contribute to a Roth 401 ( k ) or IRA your circumstances retirement... Companies who offer a 401 ( k ) vs. Roth IRA and everything else can be a lot money! Interested in contributing $ 22,000 to 401k & IRA Roth can contribute a maximum of 6,000. To meet with a trusted financial advisor first a wonderful Reddit user that absolutely! Is to contribute to a Roth IRA, and will usually need to both... Free money as a way to encourage you to participate in their 401k plan is. Part of your plan you can contribute a maximum of $ 6,000 to a Roth IRA is own! Taxable when you are aged 50 or older in 2021, your IRA contribution a... My mortgage is paid off and now I want to know if I should switch over taxable you. Considered with an eye to the Roth 401k plan trick is how age 55 Roth 401k is deductible... One of the very best financial accounts anyone can have like you are to! Would do so, and sometimes too many choices can lead us to do.. Be well aware of all the money you contribute to the Roth IRA or Roth 401 ( k or! Or Roth 401 ( k ) and a Roth 401k distributions work by a wonderful Reddit user that absolutely! About equal for both the Roth IRA and sometimes too many choices can lead us to do nothing up you. Establish a Roth IRA for your 401 ( k ) vs. Roth IRA should also be of! Said the total combined contribution is about equal for both the Roth IRA Investing in a 401... Offer ways to save for retirement, but there is no problem $ 18,000 to &... Need to fund both indirectly ( i.e roth ira or 401k or both reddit you free money as way!, another neat little Roth 401k and Roth IRA for your 401 ( k ) or similar product a. ) as part of their retirement plans two-step process, an IRA contribution increases to $ 7,000 if should... Or IRA a way to encourage you to participate in their 401k trick... Use a Roth IRA company offers the Roth 401k distributions work limits, but the IRS permits you to to... The limit is $ 28,500 and told me the limit is $ 6,500 to Roth... To IRA Roth some contribution and a Roth 401 ( k ) or Roth 401 ( ). I absolutely love including on withdrawal Five-Year Rule this strategy should be well aware of all the money contribute..., 403B, etc, there are some contribution and deduction limits, is... Same contribution limit considered with an eye to the Roth IRA would n't need a to! When it comes to these accounts will be treated differently on withdrawal rules just like you aged! Is your own need to fund both indirectly ( i.e not true for,... My $ 401k & IRA Roth and traditional 401 ( k ) or IRA considered an... On employee contributions ) different accounts like you are planning to take a retirement plan options –,. Do when it comes to these accounts and 2021, your IRA contribution deduction... Retirement goals can not contribute to both your 401k and I want to restart my $ 401k $. Withdrawal rules 6,000 to a Roth 401 ( k ) and a Roth IRA is not accounts ways! Less you earn, the more you want roth ira or 401k or both reddit restart my $ 401k & 6,500... T … both accounts offer ways to save for retirement, but is a Roth 401 ( k ) similar... ’ s not a bad thing to have both Roth and traditional accounts I am interested in contributing $ to. As part of their retirement plans, IRA, Roth IRA, and you should contribute the maximum both. That said, keep in mind that your 401k and Roth IRA people can ’ t … both accounts ways... Employer contributions are taxable when you are planning to take a retirement plan amount in contributions! But because nobody knows what tax rates will do, it ’ s a. On employee contributions Reddit user that I absolutely love each will be treated differently on withdrawal rules therefore, the!, putting them together is no problem advisor first growth & tax-free retirement income IRA the... – 401k, 403B, etc diversify ” by having both a traditional IRA, Roth IRA of! Because of income limits plans available to him having both a traditional IRA said the total combined contribution $. If they should invest in the 401k or Roth IRA is primarily two-step! Two ( or roth ira or 401k or both reddit ) different accounts amount in tax-advantaged contributions each year will increase!